Real time network exchange with seller specified exchange parameters and interactive seller participation

ABSTRACT

A system and method for networked exchange are disclosed. A system for networked exchange comprises an internal proxy; an exchange processor in communication with the internal proxy; a database in communication with the internal proxy; an external proxy in communication with the internal proxy; and, a communications network connected to the external proxy. A method for networked exchange comprises 8 steps. Those steps are (1) specifying a mode of operations for an exchange; (2) identifying a commodity for the exchange; (3) listing information about the commodity; (4) accessing of the listing by a potential purchaser; (5) accessing the network-based exchange by the potential purchaser; (6) processing information generated by the potential purchaser, the information comprising a negotiation; (7) concluding the negotiation; and, (8) clearing the concluded negotiation.

This application is a continuation of U.S. application Ser. No.08/891,633 filed Jul. 11, 1997, now U.S. Pat. No. 6,058,379.

FIELD OF THE INVENTION

This invention relates generally to the electronic exchange of goods andservices via an electronic network and, more particularly, to a systemand method for networked exchange.

BACKGROUND OF THE INVENTION

All trade is based upon new needs brought on as a result of newtechnology—the advent of long term human habitats over the old style ofhunting and gathering brought about the need for trading for items whichwere not or could not be autonomously made. The need to establish a newtype of trading process, beyond the barter system, brought about anestablishment of a medium of exchange (e.g., money). This has evolvedover the ages into modern day commerce with monetary exchanges, stockmarkets, supermarkets, gas stations, flea markets, swap meets, etc.However, many of the globally employed systems may not be as efficient,or as fair as possible, since they rely on third party interaction orare based around a set market style or process. The utopian vision of amarketplace would be where the utility of the marketplace allowed for anindividual to achieve the most efficient and advantageous level oftransaction negotiation, fairest market value, protected and guaranteedclearing for a commodity or service.

Ancient people invented money by placing fixed values on certain itemssuch as shells, beads, stones, and even salt, with ingots being the mostcommon form of money. Ingots were clumps of precious metal in noparticular shape or size with their worth depending on their mineralcontent and weight. Their value was high because these metals were hardto find and difficult to mine. Ingots were not a panacea, though, andposed some problems for merchants even after being weighed. The greatestof these was determining true value because the content and purity ofingots varied. A partial solution for this dilemma was solved bystamping them with seals. Each seal displayed a description of the metalcontent, as well as a declaration of its weight. Even with the use ofseals, unscrupulous traders would shave some of the metal off the ingotfrom the opposite side from the seal, thus depreciating the value.Despite these incipient problems associated with development, the worldmonetary system has evolved from ingots and ancient coinage to wiretransfers, debit and credit cards and from primitive barter to currencyexchanges, stock markets and intertwined global markets.

The Internet and world wide web (WWW) provide the first true continuousworld wide communications structure open to the individual. This allowsfor new ways to address global commerce. There are several differentmethods in which commerce may be implemented as there are a vast varietyof commodities and services that are in need of being traded. Theconcept of using the Internet as a marketplace or auction forum is notparticularly unique or difficult of an endeavor. The current technologyof using E-mail and a telephone for notification employed by existingfirms in closed environments has a rather low entry threshold ofcomplexity. This method can be duplicated quite easily and has limitedor no room for evolution. However, digital technology lends itself quitereadily to real-time high-volume transactions made by multipleparticipants using shared information. Businesses are moving to digitaltechnologies and this leads to a need to invent new technology andprocesses to fill the utility.

Commerce systems over the Internet are known in the art. Most of thesesystems operate on a post and match process; that is, the systems workby having a prospective buyer bid on an item, and if the bid matches theseller's specified selling price, the item is sold to the buyer. The bidand notification may not be processed in real time. Additionally, theseller does not have the ability to intervene once the exchange processhas been initiated—once the offer for sale or exchange is made, theseller is isolated from the transaction until it is complete.

Previous networked commerce systems do not allow a user to bidautomatically on an item. Thus, in order to stay apprised of what isbeing offered for sale, a person or a representative would have toremain on the network constantly. Additionally, most systems requireparticipants to be registered members of a system where sellers may berestricted only to merchants, and most rely on credit card transactions.It is difficult for a prospective buyer to search for the exact itemthat he is looking for without a considerable input of time. Finally, insystems that involve the sale of stocks, operations are still routedthrough a brokerage firm, and the system itself is essentially an orderplacing service.

SUMMARY OF THE INVENTION

It is an object of the invention to provide an improved electronicnetwork-based exchange system that overcomes these and otherdeficiencies of prior systems.

It is a further object of the invention to provide such an exchange thatoperates and clears on a real-time basis.

It is a further object of the invention to provide such an exchange thatprovides flexibility, for example, to enable a seller to determine thestyle and parameters of a particular exchange such as whether theexchange is “open” or “closed.”

It is a further object of this invention to provide a real-timeelectronic network-based exchange that is interactive, for example, toenable a seller to intervene at any time during the exchange process.

It is a further object of the invention to provide such an exchange thatprovides filtering (e.g., filtering of bid information) to ensurecompliance with predetermined criteria, to avoid unnecessary use ofsystem resources and for other purposes.

It is a further object of the invention to provide such an exchange thatenables classification and categorization of items to be exchanged toenable various search techniques and facilitate location of items ofinterest.

It is a further object of the invention to provide such an exchange thatprovides flexibility of a push or pull system.

It is a further object of the invention to provide such an exchange thatprovides a proxy with processing to provide security and conserve systemresources.

It is a further object of the invention to provide such an exchange thatprovides an improved graphical presentation of exchange information,such as current and/or past bid information.

It is a further object of the invention to provide such an exchange thatprovides advanced client-side functionalities and capabilities,including artificial intelligence and agents style behaviors.

In order to accomplish these and other objects of the invention, anelectronic network-based exchange system is provided that comprises aserver system for hosting transaction operations, and client terminalsconnected to the server via a communications network. Variousclient/server architectures may be used. The exchange host is operatedby an exchange operator. Sellers and buyers access the exchange to listitems and bid on listed items via client terminals. The server side ofthe system preferably comprises at least one database, an internalproxy, an external proxy, an exchange processor and a listing. Theclient side can be any suitable client terminal. Separate clientsoftware for sellers and buyers may be provided, or both may be providedtogether.

According to one embodiment of the invention, the system enables thecapability to operate an exchange that is based on at least aneight-step capability. In step one, the mode of operation of theexchange is specified. In this step, parameters such as the start/stoptime for the exchange, the exchange's open or closed status, public orprivate access to negotiations, seller information, bid requirements,etc. may be specified. This may be done by the seller and/or auctionhost. Next, the proposed exchange item can be further identified. Thisinformation may include entering information about the item to be sold,which may include its classification, pricing information, etc. Next,the proposed item is added to an electronic listing. This may includeposting the information on a world wide web page. Next, on the clientside, a potential purchaser accesses the listing information. Forexample, the potential purchaser may view listed items. If desired, thepotential purchaser accesses the exchange. This includes the opportunityto “chat” (e.g., to electronically obtain additional information about alisted item or auction terms) and bid on a listed item. Next, if a bidis made, the client passes the bid information to the server side to beprocessed. This processing may include a first level of filtering todetermine if the bid meets predefined criteria or rates. If it does not,it is rejected. If it does, it is passed on for further processing. Forexample, it may be compared to previous bids to determine if it is thecurrent best bid. Additional bids can be similarly processed. Upon theoccurrence of some event, the opportunity for bidding on an item isconcluded. This may be done on an automatic basis, or it may be donemanually through transaction control. For example, transaction controlmay be exercised by the seller (e.g., when an acceptable bid isreceived). Upon conclusion of the bidding, a clearing process isperformed. Various clearing mechanisms may be used.

This system precludes traditional exchange market systems in that itprovides a vehicle in which the individual is empowered to circumventthird parties to ensure that exchanges are as fair as possible as wellas provide a mechanism to facilitate the migration of trading to theform and process it will take in the future.

A technical advantage of the present invention is that a system andmethod for networked exchange is provided. Another technical advantageis that the invention provides real-time exchange to occur over anetwork. Another technical advantage is that the seller can set theparameters of the exchange. Another technical advantage is that theexchange is interactive, allowing the seller to intervene at any timeduring the exchange process.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 is a overall system block diagram according to one embodiment ofthe invention.

FIG. 2 depicts the exchange process according to a preferred embodimentof the invention.

FIG. 3 is a flowchart of the internal clearing process.

FIG. 4 is a flowchart of the external clearing process.

FIG. 5 illustrates the bidding process according to one embodiment ofthe invention.

FIG. 6 is a system component layout diagram according to one embodimentof the invention.

FIG. 7 is a system component layout diagram according to one embodimentof the invention.

FIG. 8 illustrates an overview of the electronic auction phases.

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS

FIG. 1 is a block diagram of an electronic network-based exchange systemaccording to one embodiment of the present invention. Preferably, thegeneral architecture used is a client/server architecture. Client/serverarchitectures, per se, are generally known. As shown in FIG. 1, theserver side comprises an exchange provider 100, which may furthercomprise at least one database 130, exchange processor 120, internalproxy 140, listing 160, and external proxy 150. Exchange provider 100 isconnected to one or more clients 170 via network 110.

If desired, exchange provider 100 may include at least two portions. Ina preferred embodiment, exchange provider 100 consists of two portions.The first portion comprises an internal portion 101, which may includedatabase 130, exchange provider 120, and internal proxy 140. The secondportion comprises external portion 103, which may include the listing160 and external proxy 150. Internal portion 101 may be separated bysecurity means 102 from external portion 103. Security means 102 may bea firewall or similar security providing device to prevent unauthorizedaccess to certain portions of the server side component.

Database 130 is a primary data storage mechanism and communicates withinternal proxy 140. It is responsible for storing data and otherinformation relating to system operation. Such information may include,system parameters, item records, account information, exchangeaccounting information and other information. Database 130 may be anyconventional database, including multiple databases or distributeddatabases.

Exchange processor 120 is a controller that performs the function ofmanaging the exchange or auction. Any suitable controller may be used.Exchange processor 120 communicates directly with internal proxy 140. Itreceives bids, processes the bids and reports out to the internal proxy.

Internal proxy 140, which itself may be a server, may be used tosanitize, authenticate, filter and route communications (e.g., chat) andassist in the clearing process. Proxies, per se, are generally known.However, particular functions are performed by internal proxy 140. Forexample, internal proxy 140 communicates directly with database 130 andexchange processor 120, and may link the internal portion 101 toexternal proxy 150 or other components of the informal portion 103. Morethan one internal proxy 140 may be provided. Preferably, clients cannotdirectly access the internal proxy. Proxy 140 may be on a firewall.

Listing 160, which may be a database, web server or other suitablemechanism provides information about items listed for exchange. Listing160 is client accessible via external proxy 150 and network 110. One ormore than one listing 160 may be provided per exchange.

External proxy 150 is responsible for security, filtering, and routing.External proxy 150 communicates with internal proxy 140, listing 160,and network 110. One or more than one external proxy 150 may be providedper exchange. External proxy 150 prevents direct client access to theinternal portion 101. It may be used to prevent unwanted or undesiredinformation from entering the exchange.

Network 110 may be any medium (wired or wireless) that allows forcommunications between components of the invention (e.g., clients andservers) and need not be homogeneous throughout the communications pathsof the invention.

A preferred embodiment of the invention operates according to FIG. 2 Itis assumed that the host has been configured. In step 200, the mode ofoperation of the exchange is specified. For example, it is specified howthe exchange will work and what rules it will work under. Informationthat may be entered during this phase may include, inter alia, the startand stop time for the exchange, the categorization of the commodity(e.g., as either a good or a service), the aspects of the exchange thatwill be “open” and those that will be “closed,” whether there will bepublic or private access to negotiations, and whether or not sellerintervention will be allowed. Other rules and terms may be specified.This information is stored in the server and used to control a givenexchange

In step 205, commodity information is entered by the seller. The termcommodity or item can include goods or services. This information mayinclude identification of a new commodity or modification of an existinglisting by an authorized person. Such information may include systemrequired administrative information such as exchange rules (parametersfor that item) seller identification, identification of the item, amajor and/or minor classification, pricing information, and other terms.Other options available to a seller client include the ability tosearch/list items, modify/remove items, intervene in an exchange (e.g.,terminate bidding or an item listed by the seller), electronic chat, andreviewing the history/status of bids. If the client selects viewing anitem by identifier (e.g., an alpha-numeric), the client may be promptedfor the identifier that a particular item is assigned. The client mayhave retained this number from a previous session, or may have receivedthe number via accessing the listing service. If the client enters avalid identifier, the buyer may be shown the item, information about theitem, or both.

In step 210, the listing information is made accessible to the public.This may include posting information on a world wide web page that thepublic can access. Additionally, an automatic identification may be usedto send E-mail to potential purchasers. Other means of making theinformation accessible may also be used. The listing itself may includehistorical data (a list of commodities traded or listed in the past andassociated transaction information), current listings and their status,and future listings (e.g., commodities scheduled to be offered, but forwhich bidding is not yet permitted). The listing may be searched byfields, keywords or other search techniques.

In step 215, a potential purchaser or exchange partner accesses theexchange via a client terminal. The purchaser client presents a numberof options. For example, the purchaser may search, obtain additionalinformation, perform electronic chat (real-time or store/forward) bidand review (history/status). For example, the search function may enablethe purchaser to search through the listing for items of interest. Thepurchaser may be provided with several fields of information that can beused to facilitate the search. These search fields may includeclassification (e.g., automobile, tool, furniture, etc.), price, termsor other fields or key words. The system may return either an exactmatch, the closest match, or an entire classification for the client tobrowse through.

The client may have the capability of browsing through the databaseusing standard navigational tools. These options allow the client toquickly advance and review through the database. Items may be displayedin various views and in various orders. Once a desired items isidentified, the buyer may obtain additional information about the listeditem. For example, the client may be provided with a chat option. Chatenables electronic communication via the network and may provide theclient with a real-time communication link with other buyers, the selleror the exchange host. Further, if the rules of the exchange provide, thechat may be either public (i.e., everyone viewing that particular itemwill be able to see the chat such as in a chat room) or it may beprivate (i.e., no one except the involved parties can see the chat).This option may be one of the exchange parameters.

Additional options may be provided to assist the client in managing theinformation. The client may be able to retrieve more information about aparticular item that is being viewed. This may be useful wheninformation for an item takes more than one screen to present. It mayalso allow the client to send an E-mail containing all of theinformation about the particular item being viewed to an E-mail address.

The potential purchaser may make a bid on an item that is currentlybeing viewed and the information is processed in step 220. Once bid isselected, the client may be provided with the current highest bid forthe item, and a window entering the required information for making abid. In order to be accepted, the bid must meet certain criteria. Forexample, the bid must be higher than the current highest bid. The systemmay have rules in place that allow only predetermined increments (e.g.,$0.50, $1, $10, etc.) depending on the particular estimated cost of theitem. Same as all, rules can be enforced on the client side and otherscan be enforced at the external proxy or internal proxy. Thisenforcement may also include the initial filtering of information. Forexample, if a bid placed is not higher than the current highest bid, theclient may not transmit the bid. Alternatively, the non-qualifying bidmay be dropped at the external proxy. Thus, unnecessary communicationsto the server are avoided.

In another embodiment of the invention, bids are not transmitted to thehost if they are irrelevant. Irrelevant bids may be bids that are lessthan the current “best” bid. In order to determine if the bid isrelevant or not, the system determines what the seller's goal is (price,location, etc.) and then determines if the bid is more desirable to theseller than the current “best” bid. If it is, it replaces the “best” bidand the seller may be notified of the new highest bid. If it is not, thebid is disregarded. Notification may include a bid identifier, an amountand other information.

New “best” bids may be broadcast to all participants in the exchange. Ifa potential purchaser owns the “best” bid, he may also be notified ofthis status.

In step 225, the negotiations between the seller and all bidding partiesare concluded. Negotiations may be concluded by expiration of thepredefined exchange time, through seller intervention, through a matchbeing achieved or other events.

In step 230, clearing process is performed. This may be tied to aclearing bank.

Clearing may be done in several fashions. One implementation of clearingis based on a simple process for modifying at least two items. The stepsrequired in the actual process of modifying these items will bedescribed in detail later. Internal clearing occurs when there is verylittle or no chance for the clearing process to fail, such as when thesystem directly controls all commodities in question. When there isinternal clearing, the integrity of every trade on the system isprotected at all times; that is, the system provides insurance or aguarantee of the trade completion. It is not possible for a participantto default after a trade is arranged. Since internal clearing isprocessed in real-time, the clients involved may proceed to the nextnegotiation immediately. External clearing occurs when at least onecommodity to be cleared requires dealing with external systems or wherethere is a possibility of failure during the clearing process.

Database 130 may have the ability to control the process of internalclearing. The present invention's implementation of clearing is based ona simple process for modifying at least two items. Referring to FIG. 3,the database can ensure the integrity of a trade by using the followingprocess. First, in step 300, the system obtains the exclusive right tomodify lock on data record #1 and on data record #2. This ensures thatno process other than the internal clearing process can access the twodata records. Next, in step 305, the system modifies the relevant datain each record. This may entail exchanging the information between thetwo locked records. In step 310, the system releases the exclusive rightto modify lock on data record #1 and data record #2. The chronologicalorder of the processes within a step is not significant, but eachprocess of a step must be complete before moving to the next step andthe steps must be completed in proper order.

If internal clearing is not available, or if it is not desired, externalclearing may be used. Referring to FIG. 4, an overview of the externalclearing process is given. First, in step 400, the system obtains anexclusive right to modify lock on data record #1 and data record #2. Instep 405, the system waits for one or more real-world events to occur.Real-world events may include a physical exchange of objects, a creditcard validation, etc. Once this real-world event occurs, in step 410,the system modifies relevant data in each record. In step 415, thesystem releases the exclusive right to modify the lock on data record #1and data record #2. At the completion of these steps, the externalclearing process is complete.

In both situations, a third data record may be modified. This may bedone in order to account for the system's commission. The commission maybe measured in several ways: it may be a percentage of the sellingprice, paid by the buyer or seller, or both; it may be a fixed amountpaid by the buyer or seller, or both, or may be any other suitable meansfor providing compensation. Based on the type of commission, data record#3, which may represent the system, is modified to include the amount ofcommission gained from this trade.

In addition to being internal or external, the clearing may also bedirect or indirect. Direct clearing would be used when the items aredirectly transferred between the buyer's and the seller's accounts.Indirect clearing would be used when items are transferred to a thirdparty or placed in escrow.

Referring to FIG. 5, an illustration of the bidding process according toone embodiment of the invention is given. First, in step 500, the clientbids on the item. In step 505, the system checks to see if the bidder isan authorized bidder. This may be based on the exchange rules setearlier by the seller. If the bidder is not an authorized bidder, anerror message 590 is returned to the client. If the bidder isauthorized, the process continues.

In step 510, the bid is checked to determine if it meets the rules,e.g., if it is greater than the current highest bid plus a predeterminedincrement. There may be other rules for determining whether the bid isvalid. In one embodiment, the increment may be solely based on the bidon the item. For example, for items with bids of less that $100, bidsmay only be made in $1 increments; for items over $100, bids may only bemade in $5 increments. In another embodiment, the bid increment may bedetermined based on the seller's estimated value of the item. In yetanother embodiment, the increment may be set by the seller regardless ofthe bid or value of the item. If the bid is not greater than the highestbid plus a predetermined increment, an error message is returned to theclient.

In step 515, the bid is transmitted to the seller or exchange. This maybe done by electronic mail, by electronic messaging, or any suitablemethod.

In step 520, the system determines if a concluding event has occurred.This may be an expiration of time, by an exact match, by sellerintervention, or any other suitable event. Once this occurs, thesuccessful bidder is notified (step 525).

In another embodiment, the seller may have the option of not selling theitem. This would allow the seller to retain control of his item shouldthe best bid be unacceptable.

Once the bidder has been notified, the clearing process is initiated instep 530.

The standard client 170 of the invention may employ various graphicaluser interface, or GUI, components, artificial intelligence andagent-like behaviors for various functions. For example, a modifiedscroller is provided. In this modified scroller, displayed items movefrom one location to another, and depending on predetermined settings,the time may then either move off the display or be retained and remainvisibly present in the display. If the item is not retained, then thescrolling area of the scroller is adjusted to be smaller by the size ofthe retained item. If enough items are retained so that the remainingdisplay space is be insufficient for proper scroller display, then theretained items may scroll in order to accommodate the new item asnecessary. Both the active and retained scrollers are able to bemanually manipulated such that items that have been previously removedfrom the display may be brought back for a type of history reviewmechanism.

In a preferred embodiment, two scrollers may be linked or associatedwith each other via some binding and may use this binding or associationto help display information in a new and unique way. There are at leastthree presentations of this scroller. The first presentation, is wherethe scrolling is in a similar direction, and another is where thescrolling is opposite direction. A center-out scroller, where thescrolling moves from the center to the outsides, may also be provided.

Any of these scrollers may have retained items as well. Dual scrollersmay be extended to three or more scrollers linked by some association.These scrollers may also be in any orientation including an orthogonalperspective such as would be in a three dimensional environment.

Security is provided for this system at different levels. Any suitablemeans for providing security to the system may be used such as anencrypted stream-based network communication.

Referring again to FIG. 1, internal proxy component 140 also has thecritical duty of handling communications with systems external to theinvention, and may employ additional security, protocols, and filters.The proxy's filters are based on any field in the protocol, butprimarily will be based on the bid, ask, and item classification fields.It may be desirable to not have direct communication between client 170and exchange 120. All communication destined for exchange 120 is routedthrough proxies 140 and 150 to insure authorized and authenticatedcommunication.

The external proxy 150 has the ability to connect to external systemsand retrieve information based upon an external protocol in order toextract information that another component requires. For instance, theexternal proxy 150 handles incoming connections from client 170 usingthe invention's protocol, and it also has the ability to handle incomingconnections from other outside sources such as E-mail, CGI scripts,telephone, fax or secondary clients with secondary protocols.

An example of this is using a web page on the World Wide Web to displayinformation about a lot for exchange. The external proxy 150 can thenextract appropriate information from the remote web page and pass thisto listing service 140 which in turn will pass information to database130 and exchange 120 as needed. The information that is required to beextracted is information that is sufficient to allow for an exchange totake place. This information is then embedded using the invention'sstandard protocol so that it can be extracted. Therefore, it would bepossible to use the Hyper Text Markup Language (HTML) comment tokens towrap the invention's required information.

Referring to FIG. 6, internal proxy 140 and exchange processor 120 areprovided with additional processing. Box A represents the additionalprocessing that applies to internal proxy 140. These processes mayinclude a clearing processor, such as a clearing bank, electronic datainterchange (EDI). Box B represents the additional processing thatapplies to exchange processor 120. These processes may include a partialmatching processor, barter matching processor or a pooling processor.One or more of the internal or external proxy can be used for, amongother things, verification of authenticity of bids, validity of bids(based on rules), filtering of bids for price, status/time, itemidentification and required information. Preferably, the internal proxyhandles more advanced functions, including authorization, identificationand final verifications. A single proxy may be used if desired. Twoproxies permit load balancing. Processing may include routing of dataand/or filtering, among other things.

Referring to FIG. 7, an example of how systems may interconnect isshown. In this embodiment, a plurality of exchange providers may beconnected via network 110. Exchange provider 100 may actually host theexchange, and a plurality of exchange providers 100 may interact vianetwork 110. Further, a plurality of clients 170 may be able to accessexchange provider 100 and participate in the exchange.

A preferred embodiment of this invention is an electronic auction.Referring to FIG. 8, an overview of the electronic auction phases isgiven. The electronic auction is designed to emulate and surpass areal-world auctions' functions and capabilities. First, in step 805, thepreview phase represents the start of an auction. A lot, or an item,preferably will have been entered by this time and when the auction isstarted, and it is immediately placed in the preview phase.

In step 810, the activity phase includes a calling for bids. If a lot isin this phase after a predetermined event and no bids are entered, thenext phase is the settlement phase. If there is a bid, the auction movesto step 815, the first interval phase. This phase is provided to give agap between the activity phase and the auction phase. It provides timeto prepare for the auction phase by placing a resting bid. No activebidding is allowed during this phase. As in step 805, if there is no bidon the lot, the next phase is the settlement phase.

In step 820, the auction phase represents the termination of the abilityof multiple bidders to bid in an individual auction. When there aremultiple concurrent auctions, the starting and stopping times may bestaggered based on factors such as, but not limited to, activity, bidvolume, price, or category. The schedule is posted when finalized, whichmay occur during the first interval phase. Any outstanding resting bidsare processed during this phase.

The second interval phase 825 is a gap between the auction phase and theinterface phase. A new resting, or maximum, bid may be entered duringthis phase for use as a fail-safe during the interface phase 830. Thereis no active competitive bidding during this phase.

The interface phase 830 is the phase where the high bidder from theauction phase may have the ability to further bid in a second auction.If a resting, or maximum, bid was entered during interval 825 or duringthe second interface phase 830, it is used as a fail-safe during thisphase in case of interface failure.

The settlement phase 835 is the phase where the results of each auctionare finalized.

A simple auction has only auction phase 820 settlement phase 835. Othersteps are included in order to promote fairness and active bidding. Step825 and 830 may be used only when there is a need to tie a computerbidder to a second auction such as one hosted by a human auctioneer ordirect buyer to seller negotiation.

The following are example embodiments:

An alternate embodiment of this invention is a paperless, brokerlessreal-time concurrent point and click trading of Securities and ExchangeCommission (SEC) listed stocks where individuals acting as anindividual, broker, or broker/dealer may buy or sell registered sharesof stock without using a brokerage firm as an intermediary. Brokerlessrefers to the fact that participants are trading directly with otherparticipants without brokerage firm or other third party assistance.Real-time means both the ability to offer shares of stock for sale or topurchase shares, and the results of bids on these offers is processednearly instantaneously and thereby known almost immediately by allexchange participants. The system will consist of real-time pricenegotiation between buyer and seller with a price matching mechanismwhen an offer to buy or sell is first entered. Trading is concurrent andinteractive for both buyer and seller. Both buyer and seller will usethe bidding mechanism to raise or lower bids and offers. Theparticipants may choose any listed item offering and place a bid if theywish to buy, or change aspects of their offering if they have offered tosell. This will allow electronic price negotiation between buyers andsellers, simulating the trading floors of the real-world exchanges. Whenan offer to buy or sell stock is first entered, a check is made by thesystem to see if there is a matching offer on the opposite side of thetrade. This match will be for the same stock at the same price intradable quantities. A similar check is made if an existing bid or offeron any shares of stock changes. If the system locates a match, a tradeis consummated. The exchange system will include an extensive databasefor customer and trade information. The system will maintain and providea record of all trades concerning the time of day, the parties involved,the price and number of shares traded, and any other information that isrequired such as required by a government regulatory agency such as theSecurities and Exchange Commission (SEC). A bid history will beavailable for any stock traded that will include the most recent offerand bid price, the price and volume of the last trade, and the previousday (or week) history. The system will provide real-time tradeinformation on a per-trade basis.

Another embodiment is the trading of “entertainment” stocks, options andfutures. These stocks and options will be issued by the governing bodyof the trading floor on participants or entrants in real-world events.In no way will a stock or option indicate an ownership in the entitythat serves as the symbol or name (i.e., sport stock in the BuffaloBills). The stock or option value is merely an indication of perceivedvalue derived by the trading floor members and market forces in thisparticular forum.

Only members of this trading floor will be allowed to trade.Registration is required to become a member of the trade floor, andmembers are assigned an account number which are kept in the tradingforum's database. To commence trading, members must have sufficientfunds in their account to pay for the stock purchase. The system willpreclude any member from trading more stock or money than is in theiraccount.

The “entertainment” refers to the excitement created or enthusiasmgenerated by the media over the anticipated outcome of a real-worldevent. This event must have multiple entrants but only oneclearly-defined winner after a period of time. Small events may occurduring this time duration that may help define the eventual winner.These small events will stimulate the trading of the entrant's stock.Depending on the trader's perceived value of how an entrant is fairingin relation to other entrants, during the trade period, will determinethe value of any entrant's stock. An example of these events may includeindividual team games leading to a championship, political primariesleading to an election, or critic's review of Oscar-bound movies.

Stocks and options are issued in an initial offering of finite amount ata par value by the governing body. This initial offering of par valuestock will be sold to trading floor members at the beginning of the timeduration for the real-world event. Options to purchase specific amountsof stock from the governing body during the time period may also beissued. The proceeds of these sales will go into a dividend depositorythat will be paid to the stock shareholders of the winning entrant,entrants, or combinations set by the specific rules for a particularevent. This dividend will be paid at the end of the time period.

As each entrant's issue becomes more subscribed, that particular stockwill be assigned a symbol and moved to the trading floor to be traded onby the trade floor members. Trading on a particular symbol is done byeither the owner of the stock offering to sell, or the governing entitymay issue more stock on this open market. Trading will simulatereal-world stock exchanges in that both sides of a trade (buyer andseller) may raise, lower, or cancel offers to trade in real-time. Thetrading floor clearing mechanisms will clear all trades and debit andcredit the stock and money into the principal's accounts. Members may belimited to the amount of stock or the amount of money in theirindividual accounts.

When the winner of the real-world event is determined, the dividend isdistributed according to the rules for this particular event. If thereal-world event is reoccurring, the stock holders may be issued stockoptions that allow them to purchase the same amount of stock at the nextissue at par value.

Another embodiment of this invention is a brokerless commodity exchange.The commodities traded may range from current contracts traded overcommodity exchanges, such as the Chicago Board of Trade, to newcontracts such as water rights, pollution credits, electric power, andpetroleum derivatives, or commodities such as commodities such asinformation (i.e., “data”) such as breaking new stories or knowledgesuch as from knowledge modeling and information brokers or others suchas bananas, rubber, or computer chips. These commodity forums could beCFTC regulated, or independent.

The membership, trading, and clearing mechanisms for a commodityexchange are similar to the stock exchange embodiment. The differenceswould be in the nature of the commodities themselves as opposed tostocks. There may be commodities that require a physical settlement withno commodity exchange for money, or a cash settlement where no commoditychanges hands.

Another embodiment is a barter exchange. This barter exchange may bebased on a client-server system that provides real-time networked forumfor barter. The clearing of the barter between members of the exchangewould be arranged completely by the participants for the trade.

All sides of the barter must be members of the exchange. Membershiprequires that the applicant use the barter exchange system to submit theapplication form that contains specific identification, background, andfinancial information. Once the applicant is granted an exchangemembership, an account number is assigned. A member must have funds or aline of credit established by a credit card available for debiting.

Members may negotiate in real-time for items. Either side of a trade mayoffer to increase, decrease, add items, remove items, or do anyvariation of trade that one is able to do in the real world. This willbe accomplished by a listing function and a system priority chat.Anonymity will be preserved in forum until a barter is consummated. Uponthe system verifying and transferring the commission to the exchange,which is charged for use of the forum, the identification of theprincipals are revealed to each other. The principles may then arrangethe details of the exchange.

Another embodiment is an exchange for all types of domestic and foreigncurrencies and their derivatives. This could include arbitrage or directswaps. Again, this exchange's membership, trading, and clearingmechanisms may operate in the same manner as the exchange system.However, differences may exist in the specific commodities that aretraded and minor adjustments may be made to account for their particularattributes.

Another embodiment is an on-line gambling forum. A digital calcutta is amethod of wagering on sporting events that are of public knowledge andgenerate interest. Calcutta wagering is based on an auction-style forumwhere all entrants of an event are auctioned to the highest bidder. Thisauction may be for an individual event, such as an automobile race, fora round, such as a golf tournament, or for a team championship. Theproceeds of the auction are placed into a pool to be divided among thehigh bidders on the top four finishers in the event or round. Therecould be many calcuttas based on a single sporting event based on bidsize, including minimum bid, maximum bid, and unlimited bid, or poolsize, including maximum pool, minimum pool, and unlimited pool or may bebased on any combination of bids size and pool size. The calcutta couldalso be based on the split of high bidders on the high finishers. Thepool could be split among high bidders on several places down from thefirst-place winner.

The digital calcutta would serve as a mechanism for wagering on highlypublicized sporting events over a computer and network. Examples mayinclude the Indy 500, the Tour de France, Wimbeldon, World Cup,Master's, Olympic events, college basketball (NCAA playoffs). News mediaoriginates the enthusiasm necessary for these events to bewell-published throughout large portions of the world. This, in turn,creates interest in wagering that could have a low entry level with alarge payoff in the foreseeable future. The electronic auction forum forwagering on these events could generate its own excitement.

Another application for computerized wagering based on the outcome ofreal-world events is the use of a virtual interactive trading floor.This would allow the participants to become odds-makers and place wagerson any event they choose without going through an intermediary. Thetrading floor would provide a real-time forum for participants tonegotiate odds, point spreads, winners, or any other form of wagering.The only criterion is that there must be a definitive outcome and thatthe method to determine this outcome is agreed upon by both parties.

A participant must register to become a member of the trading floor andbe assigned an account. Before the participant would be allowed to placeor offer a wager, the total amount of funds or credit necessary to coverthis wager must be in his account. Once a wager is made, the totalamount involved may be placed in the trading floor's depository. If theparticipant used a line of credit issued by a credit card, approvalwould be verified and the funds immediately transferred. The wager wouldbe “locked” until the funds were transferred; this means that theparticipants could not reject the wager while the funds were beingtransferred. This transfer would take no longer than a few seconds. If,for any reason, funds were unavailable, the bet would be canceled. Oncethe event's outcome is determined, the wager would be settled and thewinner's account would be credited via the trading floor's clearingmechanism. A small commission would be paid to the trading floor forevery cleared wager.

If desired, artificial intelligence capability can be added to the buyerclient to enhance its capabilities. For example, the buyer may usesoftware agents to automatically search for items to bid on, may monitorbid status and/or closing items to automatically bid on items, withoutbuyer intervention (subject to preset parameters by the buyer). Otherfunctions can be added such as agent behaviors, single or multipleclients working together to address the market, and allow for the use ofdifferent sources of data such as on-line news tickers, informationbrokers and knowledge modeling databases. If desired, host-to hostcommunication can be permitted. Multiple item lots may also bepermitted.

In a preferred embodiment, a virtual online bank (VOB) may be provided.The VOB may be used to provide convenience to the traders anccredibility to the exchange. Margin services may be provided by the VOBto a client based on a predetermined criteria. This predeterminedcriteria may include the results of a credit check, past tradingexperience, etc. A client may be provided the option of visiting the VOBat any time during the access to the exchange.

Although the present invention has been described in detail, it shouldbe understood that various changes, substitutions, and alterations canbe made without departing from the intended scope as defined by theappended claims.

1. A computer-implemented method for operating a real time networkedexchange in which a financial instrument is traded from a firstparticipant to a second participant, the method comprising: undercontrol of instructions executed by at least one processor of a hostserver, configuring the host server on which the networked exchange isoperated according to a mode of operations by: defining a start time ofthe exchange, defining a stop time of the exchange, defining rules ofpublic access to the exchange, and providing a capability for the firstparticipant to intervene in the exchange by terminating an offer of atrade; receiving from a first participant over a computer network anoffer to trade the financial instrument, the financial instrument beingin an account of the first participant at the exchange; receiving from asecond participant over a computer network an offer to trade an item forthe financial instrument, the item being in an account of the secondparticipant at the exchange; associating the first participants offerwith the second participant's offer; and clearing the trade between thefirst and second participants of the item for the financial instrumentby: transferring the item traded by the second participant to theaccount at the exchange of the first participant, transferring thefinancial instrument to the account at the exchange of the secondparticipant, making the financial instrument immediately available tothe second participant for additional trading on the exchange, andmaking the item immediately available to the first participant foradditional trading on the exchange.
 2. The computer-implemented methodof claim 1, wherein the mode of operations includes defining a minimumoffer increment.
 3. The computer-implemented method of claim 1, whereinthe mode of operations defines a best offer.
 4. The computer-implementedmethod of claim 3, further comprising comparing two or more offers totrade an item for the financial instrument to select the best offer asdefined by the mode of operations.
 5. A computer-implemented method foroperating a networked exchange in which a stock, security, option,future, commodity, currency, or derivative is traded from a firstparticipant to a second participant, the method comprising: undercontrol of instructions executed by at least one processor of a hostserver, programming the host server to operate the networked exchangeaccording to a mode of operations by: defining a start time of theexchange, defining a stop time of the exchange, defining rules of publicaccess to the exchange, and providing a capability for the firstparticipant to intervene in the exchange by terminating an offer of atrade; receiving from a first participant over a computer network anoffer to trade the stock, security, option, future, commodity, currency,or derivative, the stock, security, option, future, commodity, currency,or derivative being in an account of the first participant at theexchange; receiving from the second participant over a computer networkan offer to trade an item for the stock, security, option, future,commodity, currency, or derivative, the item being in an account of thesecond participant at the exchange; associating the first participant'soffer with the second participant's offer; and clearing the tradebetween the first and second participants of the item for the stock,security, option, future, commodity, currency, or derivative by:transferring the item traded by the second participant to the account atthe exchange of the first participant, transferring the stock, security,option, future, commodity, currency, or derivative to the account at theexchange of the second participant, in connection with the transfer ofthe stock, security, option, future, commodity, currency, or derivative,making the stock, security, option, future, commodity, currency, orderivative available to the second participant for additional trading onthe exchange, and in connection with the transfer of the item, makingthe item available to the first participant for additional trading onthe exchange.
 6. The computer-implemented method of claim 5 in whichclearing the trade is completed without submissions from outside theexchange.
 7. The computer-implemented method of claim 5 in whichreceiving from the second participant over a computer network an offerto trade an item for the stock, security, option, future, commodity,currency, or derivative includes receiving an offer to purchase thestock, security, option, future, commodity, currency, or derivative forcash.
 8. The computer-implemented method of claim 5 further comprisingtransferring funds from the first participant's account, from the secondparticipant's account, or from both accounts to the exchange as a chargefor the trade.
 9. The computer-implemented method of claim 5 in whichreceiving from the second participant over a computer network an offerto trade an item for the stock, security, option, future, commodity,currency, or derivative includes receiving from the second participantover a computer network an offer to trade funds for the stock, security,option, future, commodity, currency, or derivative, and furthercomprising: providing an account at the exchange for the secondparticipant, the account including funds equivalent to a purchase priceof the stock, security, option, future, commodity, currency, orderivative; and providing an account at the exchange for the firstparticipant, the account containing the stock, security, option, future,commodity, currency, or derivative, wherein both the secondparticipant's funds and the stock, security, option, future, commodity,currency, or derivative are controlled by the exchange as required toprovide completion of the clearing process in real time.
 10. Thecomputer-implemented method of claim 5 in which clearing the tradeincludes: obtaining an exclusive right to modify a lock on a first datarecord; obtaining an exclusive right to modify a lock on a second datarecord; altering data in said first data record and said second datarecords to indicate the trade; releasing said exclusive right to modifylock on a first data record; and releasing said exclusive right tomodify lock on a second data record.
 11. The computer-implemented methodof claim 5 in which receiving from the second participant over acomputer network an offer to trade an item for the stock, security,option, future, commodity, currency, or derivative includes receiving anautomatic bid on behalf of the second participant without the secondparticipant's intervention, the automatic bid being made a softwareagent acting in accordance with pre-specified criteria.
 12. Thecomputer-implemented method of claim 11 in which the software agentsearches for the stock, security, option, future, commodity, currency,or derivative to trade for and monitors the second participant's bidstatus on stock, security, option, future, commodity, currency, orderivatives.
 13. The computer-implemented method of claim 5 in which:receiving from the second participant over a computer network an offerto trade an item for the stock, security, option, future, commodity,currency, or derivative includes receiving from multiple secondparticipants multiple offers; and associating the offer to trade thestock, security, option, future, commodity, currency, or derivative withthe offer to trade an item for the stock, security, option, future,commodity, currency, or derivative includes associating the highest ofthe multiple offers with the offer to trade the stock, security, option,future, commodity, currency, or derivative.
 14. The computer-implementedmethod of claim 5 in which receiving from the first participant over acomputer network an offer to trade the stock, security, option, future,commodity, currency, or derivative includes receiving an offer from thefirst participant to trade the stock, security, option, future,commodity, currency, or derivative at a specified price.
 15. Thecomputer-implemented method of claim 5 in which receiving from thesecond participant over a computer network an offer to trade an item forthe stock, security, option, future, commodity, currency, or derivativeincludes receiving from the second participant over a computer networkan offer to trade cash, currency, a security, a stock, a derivative, ora commodity for the stock, security, option, future, commodity,currency, or derivative.
 16. The computer-implemented method of claim 5further comprising providing by the exchange an on-line electronic chatcapability through which the second participant and the firstparticipant can negotiate.
 17. The computer-implemented method of claim5 in which clearing the trade includes clearing the trade in real timeand in which the exchange provides to exchange users information aboutoffers to trade stock, security, option, future, commodity, currency, orderivatives and offers to trade items for stock, security, option,future, commodity, currency, or derivative and in which the informationis updated in real time upon completion of the trade to reflect the realtime clearing of the trade.
 18. The computer-implemented method of claim5 in which: receiving from a first participant over a computer networkan offer to trade the stock, security, option, future, commodity,currency, or derivative includes receiving from the first participant anoffer to trade the stock, security, option, future, commodity, currency,or derivative without an intermediary broker; and receiving from thesecond participant an offer to trade an item for the stock, security,option, future, commodity, currency, or derivative includes receivingfrom a second participant an offer to trade an item for the stock,security, option, future, commodity, currency, or derivative without anintermediary broker, the exchange providing a forum for a trade betweenthe first participant and the second participant without using anintermediary broker.
 19. The computer-implemented method of claim 5 inwhich receiving from the first participant over a computer network anoffer to trade the stock, security, option, future, commodity, currency,or derivative includes changing an aspect of the offer before the offeris accepted.
 20. The computer-implemented method of claim 5 in whichassociating by the exchange processor the first participant's offer withthe second participant's offer includes matching in real time an offerfrom a first participant with an offer from a second participant toeffect a trade of at least one stock, security, option, future,commodity, currency, or derivative.
 21. The computer-implemented methodof claim 5, wherein the mode of operations includes defining a bestoffer.
 22. The computer-implemented method of claim 21, furthercomprising comparing two or more offers to trade an item for the stock,security, option, future, commodity, currency or derivative to selectthe best offer as defined by the mode of operations.
 23. Acomputer-readable storage medium having computer-executable instructionsstored thereon which, when executed on a computer, cause the computerto: receive a mode of operations that specifies how an exchange is to beoperated; configure the exchange according to the received mode ofoperations by: defining a start time of the exchange, defining a stoptime of the exchange, defining rules of public access to the exchange,and providing a capability for a first participant to intervene in theexchange by terminating an offer of a trade facilitated through theexchange; receive from the first participant over a computer network anoffer to trade a stock, security, option, future, commodity, currency,or derivative, the stock, security, option, future, commodity, currency,or derivative being in an account of the first participant at theexchange; receive from a second participant over a computer network anoffer to trade an item for the stock, security, option, future,commodity, currency, or derivative, the item being in an account of thesecond participant at the exchange; associate by the computer, the firstparticipant's offer with the second participant's offer; and clear thetrade between the first and second participants of the item for thestock, security, option, future, commodity, currency, or derivative by:transferring the item traded by the second participant to the account atthe exchange of the first paragraph, transferring the stock, security,option, future, commodity, currency, or derivative to the account at theexchange of the second participant, in connection with the transfer ofthe stock, security, option, future, commodity, currency, or derivative,making the stock, security, option, future, commodity, currency, orderivative available to the second participant for additional trading onthe exchange, and in connection with the transfer of the item, makingthe item available to the first participant for additional trading onthe exchange.
 24. The computer-readable storage medium of claim 23,wherein the mode of operations defines a best offer.
 25. Thecomputer-readable storage medium of claim 24, wherein thecomputer-executable instructions stored thereon, when executed on thecomputer, further cause the computer to compare two or more offers totrade an item for the stock, security, option, future, commodity,currency or derivative and to select the best offer as defined by themode of operations.
 26. A computer-implemented method of operating areal time networked exchange in which a stock, security, option, future,commodity, currency, or derivative is traded from a first participant toa second participant, the method comprising: under control ofinstructions executed by at least one processor of a server computer,programming the server computer to operate the real time networkedexchange according to a mode of operations by: defining a start time ofthe exchange, defining a stop time of the exchange, defining rules ofpublic access to the exchange, and providing a capability for the firstparticipant to intervene in the exchange by terminating an offer of atrade; receiving from a first participant over a computer network anoffer to trade the stock, security, option, future, commodity, currency,or derivative, the stock, security, option, future, commodity, currency,or derivative being in an account of the first participant at theexchange, making the offer available in real time to be accepted by asecond participant; receiving from the second participant over acomputer network an offer to trade an item for the stock, security,option, future, commodity, currency, or derivative, the item being in anaccount of the second participant at the exchange; associating in realtime the first participant's offer with the second participant's offer;clearing the trade between the first and second participants of the itemfor the stock, security, option, future, commodity, currency, orderivative in real time by: transferring the item traded by the secondparticipant to the account at the exchange of the first participant,transferring the stock, security, option, future, commodity, currency,or derivative to the account at the exchange of the second participant,making the stock, security, option, future, commodity, currency, orderivative available to the second participant for additional trading onthe exchange, making the item available to the first participant foradditional trading on the exchange; and displaying in real time toparticipants in the exchange that the trade has been completed.
 27. Thecomputer-implemented method of claim 26, further comprising providing acommunication channel for the first participant and the secondparticipant to negotiate an exchange.
 28. The computer-implementedmethod of claim 26, in which receiving an offer to trade an item for thestock, security, option, future, commodity, currency, or derivative,includes receiving an offer generated by an artificial intelligence inaccordance with parameters specified by the second participant.
 29. Thecomputer-implemented method of claim 26, wherein the mode of operationsdefines a best offer.
 30. The computer-implemented method of claim 29,further comprising comparing two or more offers to trade an item for thestock, security, option, future, commodity, currency or derivative toselect the best offer as defined by the mode of operations.